SonicWALL, which focuses on providing firewall software and appliances to the small and midsize business market, earned about $260 million in revenue last year; about two-thirds of that income came from North American customers.

Dell beefed up its network security options in a big way March 13 by acquiring unified threat management software provider SonicWALL.

Terms were not disclosed, but Wall Street's Jefferies & Company estimated Dell paid between $1 billion and $1.5 billion in cash.

San Jose, Calif.-based SonicWALL, which focuses on providing firewall software and appliances to the small and midsize business market, earned about $260 million in revenue last year; about two-thirds of that income came from North American customers.

New, Powerful Set of Networking Products

Acquisition of SonicWALL gives Dell a new and powerful set of products and services to compete with Cisco Systems, Juniper Networks, and HP in the enterprise switching and services business.

"SonicWALL brings simplicity to what can be a very disjointed and complex issue," President of Dell Software John Swainson told listeners on the news conference call. "It requires less training, streamlines installation, gives customers the ability to update all their security functions at once, and the solution helps our customer adhere to regulatory compliance."

"While SonicWALL is more expensive relative to Dell's recent acquisitions, it still fits with the company's focus of acquiring companies with differentiated intellectual property, but limited reach," analyst Brian G. Alexander of Raymond James wrote in a media advisory.

"We believe this acquisition dovetails nicely with SecureWorks, which can not only manage all of a company's firewalls as a service, but also drive growth through cross-selling SonicWALL's solutions to its captive customer base."

Alexander said that while it appears that Dell is convinced it can take SonicWALL up market, he cautioned investors that "incumbents are well-entrenched and this market will more likely be a longer-term opportunity. We do not believe there is much, if any, overlap with Dell's existing relationship with Juniper, though this certainly encroaches on Juniper's markets.

"That said, Dell is slowly pruning away third-party revenue, and the acquisition of Force10 would have likely created more angst between the two vendors, in our opinion," Alexander wrote.

Another Step in Dell's Clearly Marked Corporate Roadmap

Dell has made no secret of the fact that it is expanding its software and services business through acquisitions in order to lessen its reliance on the PC and notebook markets, which have dropped in sales in favor of smartphones and tablets. Desktop and laptop PCs account for 54 percent of Dell's revenue.

SonicWall is the second company in three weeks that Dell has acquired (following the purchase of application backup provider AppAssure Feb. 24) and the 13th company in the last two years.

SonicWALL was bought by a private equity firm for $716 million in July 2010. Dell expects the acquisition to close in July.